Single factory doctrine in excise: separate units with common control and integrated processing can lose exemption when split as a facade.

Separate processing units may be treated as one factory for central excise where the factual arrangement shows common control, shared premises, integrated processing, and use of one unit's facilities by the other. The exemption under Notification No. 253/82 depended on the specified processes being carried out in the same factory, so a split structure engineered to separate bleaching, mercerising, calendering and stentering could be disregarded if it was only a facade. On those facts, the excise authority could examine the arrangement, treat the units as a single manufacturing unit, and insist on the appropriate licensing consequences.

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Issues: Whether the two adjoining processing units, though separately organised as a private limited company and a partnership firm, constituted one factory for the purpose of central excise and whether the Collector had jurisdiction to treat the arrangement as a device to secure exemption under the relevant notifications.

Analysis: The exemption regime granted relief only where the specified processes were carried out under the prescribed conditions, and Notification No. 253/82 showed that the availability of exemption depended on whether the processes of bleaching, mercerising, calendering and stentering were carried out in the same factory. The evidence relied upon by the Collector showed common control, adjoining premises, shared use of the premises, provision of electricity by one unit to the other, a common operational chain in which grey fabric was first processed in one unit and then sent wet to the other for finishing, and the purchase and use of a calendering machine by the so-called non-power unit. These circumstances supported the conclusion that the separate entities were only a facade and that the split was engineered to obtain the benefit of both exemptions.

Conclusion: The Collector was competent to examine the arrangement under the excise law, and the finding that the two units were in substance one factory was upheld.

Final Conclusion: The petitions failed and the excise authority's order treating the two units as a single manufacturing unit and requiring appropriate licensing was sustained.

Ratio Decidendi: Where the factual arrangement shows that ostensibly separate units are only a camouflage for a single manufacturing operation, the authority may treat them as one factory for excise purposes and deny exemption claimed by splitting the process.

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